in 5 minutes

Introduction

Blockchains hold great promise across various fields like IoT, finance, governance, identity management, web decentralization, gaming, and asset-tracking.

Despite this potential, real-world deployment has been limited due to five key failures in current technology stacks: scalability, isolatability, developability, applicability, and governance.

Scalability

Defined as the system's ability to efficiently handle a growing number of transactions without compromising performance.

Isolatability

The capability of addressing the diverse needs of multiple parties and applications within the same framework without unduly impacting other parts of the system.

Developability

The effectiveness and ease with which developers can work with the technology.

Applicability

How the technology addresses real-world needs and challenges on its own without needing other technology or applications.

Governance

How decisions are transparently made to manage and evolve the network.

Polkadot (DOT) seeks to overcome these challenges, offering advantages compared to other networks:

Scalability with Nested Relay Chains

Boosting capacity through nested relay chains for efficient growth to meet increasing demands.

Heterogeneous Sharding

Bringing multiple chains into one network. This allows different chains to work simultaneously, managing transactions and securely exchanging data. Unlike traditional models, Polkadot lets each chain specialize for specific purposes.

Groundbreaking Upgradeability

Achieving seamless, forkless upgrades through transparent on-chain governance, reducing risks.

Cross-Chain Compatibility for Innovation

Facilitating smooth communication, value exchange, and sharing of functionalities between shards.

Transparent and Community-Driven Governance

Empowering DOT holders with the ability to propose changes, vote on decisions, and participate in electing council members.

Polkadot's innovative design centers around the relay chain, positioned as the core component and serving as Layer 0. This foundational layer provides shared security and consensus for the entire Polkadot network. Parachains, as Layer 1 blockchains, connect to the relay chain, ensuring security and consensus, creating a cohesive and interoperable ecosystem within the Polkadot network.

In essence, from the Polkadot litepaper, “Polkadot is a next-generation blockchain protocol that unites an entire network of purpose-built blockchains, allowing them to operate seamlessly together at scale. Because Polkadot allows any type of data to be sent between any type of blockchain, it unlocks a wide range of real-world use cases.”

Illustration from Polkadot Litepaper

This is Polkadot in 5 ✋ minutes

Key Milestones

Polkadot was conceptualized by Dr. Gavin Wood, one of the co-founders of Ethereum, in late 2016.

The idea was to address the limitations and challenges faced by existing blockchain networks, such as scalability, interoperability, and governance.

Whitepaper 2016

Dr. Gavin Wood released the Polkadot whitepaper in November 2016. The paper outlined the vision for a heterogeneous multi-chain network that allows different blockchains to transfer messages and value in a trust-free manner.

Web3 Foundation and Parity Technologies 2017

The Web3 Foundation, dedicated to building a decentralized web, supported the development of Polkadot. Parity Technologies, led by Dr. Wood, became the primary development team.

ICO and Fundraising 2017

Polkadot held an Initial Coin Offering (ICO) in October 2017 to secure funding for its ongoing development. Within a span of less than two weeks, the ICO successfully raised $145 million, marking it as one of the significant ICOs during that period.

Testnet Launch 2019

The Kusama testnet, launched in 2019, served as a "canary network," allowing developers to test features before deploying them on the main Polkadot network.

Mainnet Launch 2020

Polkadot's mainnet, also known as the Relay Chain, went live on May 26, 2020, enabling DOT token transfers and user participation in network governance.

Parachain Auctions 2021

The focus shifted to implementing parachains—specialized blockchains connected to Polkadot. Parachain slot auctions were introduced, allowing projects to secure slots by bonding DOT tokens.

Ongoing Evolution 2019

Polkadot is actively advancing with ongoing development initiatives, introducing upgrades, refining existing features, and integrating new parachains. The expansive Polkadot ecosystem, featuring diverse decentralized applications (dApps) and projects, continues to flourish. Notably, the much-anticipated Polkadot 2.0 is poised to mark a significant leap forward in the platform's evolution (more of this later).

Today, Polkadot stands as a leading blockchain platform, emphasizing scalability, interoperability, and governance to foster a decentralized and interconnected Web3 ecosystem.

Train Station

Train Station Architecture
Architecture Roles

Relay Chain - Central Hub

Imagine a central train station as the heart of a vast transportation network (Polkadot network), which we'll call the Relay Station. The Relay Station is responsible for coordinating the movement of trains (transactions) and ensuring they reach their intended destinations. In Polkadot, this central hub is the Relay Chain, serving as the primary chain that connects and oversees the entire network.

Parachains - Train Lines:

Now, picture various train lines (Parachains) branching out from the central railway station. Each train line represents a Parachain, operating independently and serving specific purposes or applications. These train lines (Parachains) can run simultaneously, allowing for multiple decentralized applications to function concurrently.

Bridges - International Connections

Imagine special platforms or sections designated as international connections (Bridges). These platforms allow trains (data or assets) from external networks like Ethereum and Bitcoin to smoothly transition onto the Polkadot train network. They serve as crucial links between different transportation systems (blockchains), fostering interoperability.

Train Station Staff
Consensus Roles

Validators - Station Master

The station master (validators) at the central Relay Station is responsible for ensuring the security and integrity of the entire railway network. Validators are chosen based on the amount of "train tokens" (DOT tokens) they hold and are willing to stake as collateral. Validators play a crucial role in authorizing the departure and arrival of trains (blocks and transactions) to maintain order and security.

Nominators - Citizens

Citizens (nominators) of Train Station city who trust specific station masters (validators) can vote (nominate) station masters they trust to oversee particular train lines (Parachains). Nominators are DOT holders who stake their tokens with the validators. Nominators share the rewards and risks with the validators they trust, creating a network of shared responsibilities.

Collators - Station Maintenance Crew

Consider collators as the maintenance crew responsible for ensuring the proper functioning of each train line (parachain). They collect transactions from citizens (nominators) and produce proofs to show the station master (validator) that everything is in order. Collators play a vital role in maintaining the efficiency and reliability of the entire train network (Polkadot network).

Fishermen - Inspectors

Think of fishermen as vigilant individuals or inspectors who monitor the train station (Polkadot network) for any signs of misconduct or bad behavior. They act as watchdogs, reporting any issues they observe to station masters (validators). This distributed surveillance helps maintain the integrity of the entire train system.

Train Station Council
‍Governance Roles

Governance - Train Station Council

Envision the Train Station Council as a dedicated committee responsible for the overall management and governance of the railway network. Council members, like elected officials, propose and vote on important decisions that shape the direction of the entire transportation system. The technical committee, composed of active builders, works alongside the council to address technical aspects and propose emergency measures when needed.

In summary, the central train station (relay chain) orchestrates the network (Polkadot), with each train line (parachain) operating independently. Participants, validators, nominators, collators, and fishermen play roles similar to station masters, trusted passengers, maintenance crew, and inspectors, ensuring secure and efficient network operation. The Train Station Council oversees governance, ensuring smooth business operations and future planning.

DOT Token

Polkadot operates a robust consensus mechanism called Nominated Proof of Stake (NPoS).

Here's how it works:

Participants, known as nominators, play a crucial role in supporting validators who secure the network. Nominators select validators they trust and delegate their cryptocurrency stakes to them.

Validators, chosen based on both their own stake and the stake delegated to them, are responsible for creating new blocks and validating transactions.

NPoS introduces a decentralized approach by allowing individuals to contribute to network security through stake delegation without directly participating in the validation process. Rewards and penalties incentivize honest behavior from both validators and nominators. This system aims to strike a balance between decentralization and efficiency in achieving network consensus.

The DOT token is integral to the functioning of the Polkadot network, with key features:

Governance ControlDOT token holders have significant control over the protocol's governance. They participate in decision-making processes related to exceptional events, upgrades, and fixes, emphasizing a decentralized and community-driven approach.

Staking IncentivesStaking is incentivized through game theory, encouraging DOT holders to behave honestly. Participants earn rewards for good behavior, while those acting maliciously risk losing their stake. Staking contributes to the overall security of the network.

Bonding for ParachainsThe addition of new parachains to the network involves bonding DOT tokens. This process ensures that valuable and relevant parachains receive support, while outdated or non-useful ones can be removed by withdrawing bonded tokens. *Note: This feature will be replaced by "core time" in the upcoming Polkadot 2.0 upgrade.

The DOT token plays a vital role in securing the network, encouraging active participation, and facilitating governance decisions.

Use Cases and Parachains

Polkadot, with its unique architecture and features, supports a wide range of use cases across various industries through its parachains.

Here are some notable use cases of Polkadot’s parachains:

Decentralized Data Storage

Polkadot can be utilized for building decentralized storage solutions. Parachains can implement storage solutions where data is distributed across the network, enhancing security and reducing reliance on centralized storage providers.

Decentralized Finance (DeFi)

Parachains on Polkadot can host DeFi projects, enabling the creation of decentralized exchanges, lending platforms, and other financial services.

Scalable dApps

Polkadot's architecture supports parallel processing through parachains, allowing for scalable decentralized applications (dApps). Developers can build and deploy scalable applications without encountering congestion issues often seen on single-chain networks.

Decentralized Autonomous Organizations

Polkadot's governance features, including on-chain governance, empower the community to collectively make decisions. This is beneficial for the creation and management of decentralized autonomous organizations (DAOs), where members can participate in decision-making.

Custom Blockchain Development

Projects and businesses can leverage Polkadot to create their own custom blockchains (parachains) with specific features tailored to their needs. This flexibility makes it a versatile platform for blockchain development.

Cross-Chain Compatibility

Polkadot allows different blockchains to connect and share information seamlessly. This cross-chain compatibility opens up opportunities for interoperability, enabling assets and data to flow between different blockchains, including networks like Ethereum and Bitcoin.

Token Interoperability

Polkadot's relay chain allows tokens to move across different parachains. This feature supports token interoperability, enabling assets from one chain to interact with assets from another.

Highlighting Polkadot Parachains

Astar and Moonbeam

Astar Network and Moonbeam are both parachains on the Polkadot network that utilize virtual machines. Astar supports dual virtual machines (WASM and Ethereum Virtual Machine [EVM]), while Moonbeam is fully EVM compatible. Both networks launched in January 2022, and while Astar aims to be a smart contract hub for overall interoperability, Moonbeam specializes in EVM interoperability.

HydraDX

HydraDX is a decentralized exchange (DEX) protocol designed to enhance liquidity on the Polkadot network through its Automated Market Maker (AMM) called the HydraDX Omnipool. Think of HydraDX as a platform where people can trade different digital assets easily on Polkadot. The Omnipool consolidates all tokens into a single pool, streamlining trading efficiency for users and enhancing potential earnings for liquidity providers.

Centrifuge

Centrifuge is a decentralized finance (DeFi) infrastructure designed to enable users to borrow and lend money through real-world assets like mortgages, invoices, and loans directly on the blockchain, without the need for complicated middlemen.

These use cases and parachains highlight the versatility of Polkadot in supporting diverse applications and innovations in the blockchain space.

Polkadot 2.0: The Future

Polkadot 2.0, a highly anticipated upgrade, is set to transform the Polkadot network into a versatile multichain platform tailored for Web3 applications.

The primary aim is to address critical challenges and enhance key aspects of the network, including scalability, interoperability, security, and governance. Noteworthy features of Polkadot 2.0 include: core time and asynchronous backing.

Core Time

The upgrade is expected to positively impact DOT token value, as projects will need DOT for core time, increasing demand. DeFi services on Polkadot also offer opportunities for DOT holders to earn rewards.

Revenue from core time sales goes to the Polkadot Treasury, with DOT holders governing fund distribution. Periodic burning of unassigned tokens introduces deflationary pressure. Considerations for DOT's value include market dynamics, adoption rates, and the evolving Polkadot ecosystem.

Asynchronous Backing

Asynchronous backing is a significant step towards achieving a future with up to 1,000 interconnected blockchains or parachains. This update, poised to be deployed on Polkadot's Rococo testnet, cuts the parachain block time in half, from 12 seconds to a swift 6 seconds. Moreover, it aims to amplify block space for each block by 5-10 times its current size.

The asynchronous backing enables flexible scheduling, contributing to Polkadot's ambitious vision of supporting 1,000 parachains and enabling over a million transactions per second.

Other Features

Other features and enhancements that come along with Polkadot 2.0 are the integration of parachains and parathreads, fortifying network versatility.

Cross-chain compatibility is strengthened to facilitate seamless asset and data flow between parachains and other blockchains.

On-chain governance undergoes enhancements, streamlining decision-making directly on the blockchain.

The future trajectory of Polkadot appears promising...

...with its advanced features, scalability enhancements, and unwavering commitment to interoperability positioning it as a fundamental pillar for the decentralized internet. This evolution holds significant implications for various sectors, encompassing DeFi applications, decentralized autonomous organizations (DAOs), gaming, non-fungible tokens, social platforms, and innovative solutions for traditional businesses like supply chain management.

Glossary